Subject: CONSTITUTIONAL LAW 2

Doctrine: Requisite of a Judicial Review

Topic: Legal Standing
Sub-Topic:
Digester: Jeffrey Diaz

G.R. No. 174697, July 8, 2010

CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC. (CREBA) v.

ENERGY REGULATORY COMMISSION (ERC) & MANILA ELECTRIC COMPANY
(MERALCO).

Brion, J.,

Facts:

1. This was a Petition for Certiorari with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction1 to nullify Section 2.6
of the Distribution Services and Open Access Rules (DSOAR), promulgated by
respondent ERC on January 18, 2006.

2. Petitioner CREBA asserts that Section 2.6 of the DSOAR, which obligates
certain customers to advance the amount needed to cover the expenses
of extending lines and installing additional facilities, is unconstitutional
and contrary to Republic Act No. 9136, otherwise known as "The Electric
Power Industry Reform Act of 2001 (EPIRA)."

3. CREBA is a non-stock, non-profit corporation, organized under the laws of the

Republic of the Philippines, with principal office at 3/F CREBA Center, Don
Alejandro Roces Avenue cor. South "A" Street, Quezon City. It has almost
4,500 members, comprising of developers, brokers, appraisers, contractors,
manufacturers, suppliers, engineers, architects, and other persons or entities
engaged in the housing and real estate business.

4. While ERC is a quasi-judicial and quasi-legislative regulatory body created

under Section 38 of the EPIRA, with office address at the Pacific Center
Building, San Miguel Avenue, Ortigas Center, Pasig City. It is an administrative
agency vested with broad regulatory and monitoring functions over the
Philippine electric industry to ensure its successful restructuring and
modernization, while, at the same time, promoting consumer interest.

5. Respondent (MERALCO) is a corporation organized under the laws of the

Republic of the Philippines, with principal office at Lopez Building, Ortigas
 Avenue, Pasig City. It is engaged primarily in the business of power production,
transmission, and distribution. It is the largest distributor of electricity in the
Philippines.

6. On January 18, 2006, the ERC modified this provision when it issued the
DSOAR. Section 2.6.1 reiterates the old rule requiring consumers located
beyond 30 meters from existing lines to advance the costs of the requested
lines and facilities. Section 2.6.2 likewise provides that the costs advanced by
consumers may be refunded at the rate of 25% of the annual gross distribution
revenue derived from all customers connected to the line extension. However,
Section 2.6.2 amends Article 14 of the Magna Carta by limiting the period for
the refund to five years, whether or not the amount advanced by the consumer
is fully paid. Section 2.6 of the DSOAR decrees that:

2.6. MODIFICATIONS AND NEW PHYSICAL CONNECTIONS:

RESIDENTIAL

2.6.1 RIGHT TO EXTENSION OF LINES AND FACILITIES – In accordance

with the Magna Carta, a residential End-user located within thirty (30)
meters from the distribution utilities’ existing secondary low voltage lines
has the right to an extension of lines or installation of additional facilities,
other than a service drop, at the expense of the utility. However, if a
prospective customer is beyond the said distance, the customer shall
advance the amounts necessary to cover the expenditures on the facilities
beyond thirty (30) meters.

2.6.2 REFUND—To recover the aforementioned advanced payment, the

customer may either demand the issuance of a notes payable from the
distribution utility or a refund at the rate of twenty-five (25) percent of the
gross distribution revenue derived from all customers connected to the line
extension for the calendar year until such amounts are fully refunded or for
five (5) years whichever period is shorter, or, if available, the purchase of
preferred shares. Revenue derived from additional customers tapped
directly to the poles and facilities so extended shall be considered in
determining the revenues derived from the extension of facilities.

7. The petitioner alleged that the entities it represented applied for electrical power
service, and MERALCO required them to sign pro forma contracts that (1)
obligated them to advance the cost of the construction of new lines and other
facilities and (2) allowed annual refunds at 25% of the gross distribution
revenue derived from the customer’s electric service, until the amount
advanced is fully paid, pursuant to Section 2.6 of the DSOAR.
 8. The petitioner seeks to nullify Section 2.6 of the DSOAR, on the following
grounds: (1) it is unconstitutional since it is oppressive and it violates the due
process and equal protection clauses; (2) it contravenes the provisions of the
EPIRA; and (3) it violates the principle of unjust enrichment.

9. Respondent ERC argued that the application of Section 2.6 of the DSOAR as
an exercise of police power directed at promoting the general welfare. The rule
seeks to address the inequitable situation where the cost of an extension facility
benefiting one or a few consumers is equally shared by them.

10. The ERC likewise asserts that the equal protection clause is observed since
the distinction between end-users residing within 30 meters of the existing lines
and those beyond 30 meters is based on real and substantial differences.

11. The ERC also maintains that Section 2 of the DSOAR is consistent with
Sections 2, 23, 41 and 43 of the EPIRA. By not subjecting most consumers to
the payment of installation costs benefitting customers located beyond a
reasonably-set boundary, the provision in question gives effect to the EPIRA
policy to ensure that the prices of electricity remain affordable, transparent, and
reasonable to the majority.

12. They finally argued that petitioner lacks the standing to file the present suit
since the petitioner is not an end-user who will sustain a direct injury as a result
of the issuance and implementation of the DSOAR.

13. Respondent MERALCO likewise reiterated ERC’s stand and likewise argued
the petitioner has no legal standing to raise question on the constitutionality of
Section 2.6 of the DSOAR.

ISSUE:

WON petitioner CREBA has legal standing to raise the question to the
constitutionality of Section 2.6 of DSOAR.
RULING:

No, the petitioner CREBA has no legal standing to raise the question to the
constitutionality of Section 2.6 of DSOAR

Legal standing or locus standi refers to a party’s personal and substantial interest
in a case, arising from the direct injury it has sustained or will sustain as a result of the
challenged governmental action. Legal standing calls for more than just a generalized
grievance. The term "interest" means a material interest, an interest in issue affected by
the governmental action, as distinguished from mere interest in the question involved, or
a mere incidental interest. Unless a person’s constitutional rights are adversely affected
by a statute or governmental action, he has no legal standing to challenge the statute or
governmental action.

The petitioner expressly enumerates its members to be the following: developers,

brokers, appraisers, contractors, manufacturers, suppliers, engineers, architects, and
other persons or entities engaged in the housing and real estate business. It does not
question the challenged DSOAR provision as a residential end-user and it cannot
because the challenged provision only refers to the rights and obligations of DUs and
residential end-users; neither the petitioner nor its members are residential end-users. In
fact, the DSOAR has separate provisions for the extension of lines or installation of
additional facilities for non-residential end-users, under its Section 2.7 entitled
"Modifications and New Connections: Non-Residential." Thus, neither the petitioner nor
its members can claim any injury, as residential end-users, arising from the challenged
Section 2.6 of the DSOAR, nor cite any benefit accruing to them as residential end-users
that would result from the invalidation of the assailed provision.

Therefore, petitioner CREBA has no legal standing to raise the question of

constitutionality of Section 2.6 of DSOAR.